Thailand Beating China With Toyota Means Shipping Boom

Rows of Mitsubishi Motors Corp. Mirage vehicles are parked on a pier prior to their shipment to Japan at the company's facilities in Laem Chabang, Thailand. “Thailand is a flourishing market for shipping lines,” said Ryota Himeno, an analyst at Barclays Securities Japan Ltd. “It’s ports have been upgraded. It’s also close to emerging economies in Asia.” Photographer: Dario Pignatelli/Bloomberg

Feb. 21 (Bloomberg) -- Toyota Motor Corp.’s success in
selling Thai-made vehicles to the Middle East and Latin America
is fueling a boom for car carriers.

Exports of Hilux pickup trucks and Fortuner SUVs helped the
Southeast Asian nation overtake China as Toyota’s third-biggest
global production hub last year. That growth helped spur Nippon
Yusen K.K., the world’s biggest operator of the roll-on, roll-off ships, to forecast it will carry 3.45 million vehicles this
fiscal year, the most in five years.

Toyota has three factories in the country and Honda Motor
Co. and Nissan Motor Co. plan to spend a combined $850 million
to boost capacity in Thailand. All of them use the country as an
export base for other developing countries in contrast to China
where they produce predominantly for the domestic market. That
has Nippon Yusen, which counts Toyota as its biggest customer,
adding ships and Mitsui O.S.K. Lines Ltd. also predicting record
volume for cars.

“Thailand is a flourishing market for shipping lines,”
said Ryota Himeno, an analyst at Barclays Securities Japan Ltd.
“Its ports have been upgraded. It’s also close to emerging
economies in Asia.”

Automakers including Ford Motor Co. and Hyundai Motor Co.
also use low-cost vehicle production hubs in countries such as
Thailand and India, boosting the need to ship vehicles to import
markets such as Australia and New Zealand.

Surging Rates

The average rate for chartering a vessel that can carry as
many as 7,000 cars was $24,700 a day last year, and it may reach
$24,800 this year, according to RS Platou Markets AS. The rate
is expected to jump to $28,000 in 2015, according to Herman
Hildan, an analyst at the investment bank.

The global fleet of car-carrying vessels such as the so-called roll-on, roll-off ships, or RoRo, increased to 730
vessels as of this month, compared with 700 at the end of 2011,
according to data compiled by Bloomberg.

Nissan, Japan’s second-largest carmaker, plans to invest 11
billion baht ($369 million) to build a second plant in Thailand,
it said in November. Honda said this month it will invest about
44.6 billion yen ($477 million) in a new factory with annual
capacity of 120,000 cars. Nissan and Honda are the two largest
sources of revenue for Mitsui O.S.K., according to data compiled
by Bloomberg.

Nippon Yusen, also known as NYK, plans to increase its
fleet of car carriers to 130 by March 2017, from 121 at the end
of March 2012. In October, it ordered four new vessels, which
are due to be completed by 2015.

Thailand

“NYK expects the worldwide demand for pure car and truck
carrier transport to steadily expand,” the company said in an
Oct. 15 statement. NYK’s ships call on Thailand as many as 150
times a year, spokesman Koji Sasaki said in an e-mail.

Shares of Nippon Yusen fell 0.9 percent to 221 yen as of
the close of trading in Tokyo today. The stock has gained 10
percent this year. Mitsui O.S.K. fell 1 percent to 304 yen and
has gained 20 percent this year.

Thailand’s total vehicle output may rise 30 percent to 3
million units by the end of 2015, according to Macquarie Group
Ltd. Toyota, which has three factories in the country, exported
406,000 units out of the 880,000 Hilux trucks, Fortuner SUVs,
Innova vans and other vehicles it built there last year,
according to the company.

Toyota made about 750,000 vehicles in China last year, and
didn’t export any model from the country. The company’s two
largest production bases are Japan and the U.S.

“The biggest growth driver for Thailand’s automotive
industry is the expansion of export capacity,” Macquarie
analysts Chak Reungsinpinya and Clive Wiggins wrote in a report
in December. “Thailand is now one of the fastest-growing global
auto markets and production centers.”

Asia’s Detroit

One of the reasons for the expansion of production
facilities in Thailand is that it has fewer labor issues
compared with China or India, said Koji Endo, an auto analyst at
Advanced Research Japan, who referred to the Southeast Asian
country as the region’s Detroit.

NYK, which had 837 ships as of the end of September in its
fleet, aims to carry 18 percent more vehicles this year. Mitsui
O.S.K. has forecast it will ship a record 3.9 million vehicles
this financial year, up 8.3 percent from last year.

The company had 90 car carriers, according to a ranking of
ships capable of carrying 2,000 vehicles or more, published by
Nippon Yusen.

NYK’s four new vessels will be capable of transiting the
Panama Canal when a third set of wider locks becomes
operational, the company said. Each of the four vessels will be
about 200 meters long, about the length of two U.S. football
fields, and capable of carrying 7,000 vehicles.

“Thailand’s emergence as a car-export nation is a big
boost to Japanese shipping lines,” said Minoru Matsuno,
president of Value Search Asset Management Co., a Tokyo-based
investment advisory firm.